India and New Zealand signed a historic Free Trade Agreement in December 2025, concluded in a record time of nine months. The agreement provides zero-duty access for Indian exports and includes a commitment of $20 billion in foreign direct investment (FDI) from New Zealand by 2030. The deal has emerged as a significant GS Paper III (Economy) topic for aspirants preparing through UPSC coaching in Hyderabad.
Features of the Agreement
- Zero-duty access: All Indian exports to New Zealand will face no tariffs.
- Tariff relaxation: India will reduce tariffs on 95% of imports from New Zealand, with 57% becoming duty-free immediately.
- FDI commitment: New Zealand has committed $20 billion investment in India by 2030, with safeguard clauses if targets are not met.
- Services and skill mobility: Easier movement for Indian professionals, students, and workers in IT, healthcare, education, construction, yoga, Ayurveda, and traditional medicine.
- Youth opportunities: Enhanced work permits, student mobility pathways, and extended post-study visas for Indian students.
- MSMEs and labour-intensive sectors: Strong boost for textiles, leather, gems and jewellery, engineering goods, and processed food exports—areas frequently discussed in economy classes at Hyderabad IAS coaching.
Sensitive Sectors Excluded
- India has protected agriculture and dairy, refusing access for milk, cheese, butter, yogurt, onions, sugar, edible oils, spices, and rubber.
- Safeguards ensure protection of farmers and small industries.
- Cooperation in horticulture: New Zealand will help improve productivity in fruits like kiwifruit, apples, and honey through centres of excellence and technical support.
Importance of the FTA
- Strengthens India’s global trade footprint and diversifies partners beyond the U.S., EU, and China.
- Provides India a gateway to Oceania and Pacific Island markets.
- Enhances soft power diplomacy, with 3 lakh Indian diaspora in New Zealand.
- Aims to double bilateral trade (currently $1.3 billion) in five years.
- First FTA negotiated by a womenled team, marking a milestone in diplomacy.
Criticisms of the Agreement
- In New Zealand: Criticised for excluding dairy and agriculture, the country’s largest industry.
- In India: Concerns about trade deficits and asymmetric gains, as imports may rise faster than exports.
- Success depends on implementation and safeguards protecting sensitive sectors.
Why India is Accelerating FTAs
- To diversify trade partners and reduce over-dependence on the U.S. market.
- To complement Make in India, PLI schemes, and deeper integration into global value chains.
- To secure strategic economic partnerships across the Pacific, West Asia, and Africa.
- Modern FTAs now extend beyond tariffs to include investment, services, and technology transfer, a trend emphasised in civils coaching in Hyderabad.
Way Forward
- Enhance domestic competitiveness and product quality.
- Ensure strict rules of origin, anti-dumping safeguards, and MSME support.
- Increase investment in research and development to meet global standards.
- Apply lessons from earlier FTAs to avoid low utilisation and ensure balanced gains.
Conclusion
The India–New Zealand FTA represents a landmark step in India’s trade diversification and global economic integration. Its long-term success will depend on protecting sensitive domestic sectors while effectively leveraging new opportunities in labour-intensive industries and services—making it a high-value contemporary topic for aspirants engaging through UPSC online coaching.
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